Energy and commodity price benchmarking and market insights · Energy and commodity price benchmarking and market insights London, Houston, Washington, New York, Portland, Calgary,

Energy and commodity price benchmarking and market insights

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illuminating the markets

California Carbon and the NorthwestCalifornia Carbon and the NorthwestPortland, Oregon

Bill Peters5 S t b 20135 September 2013

• Price assessment

Argus coverage

• VWA of all trades (ICE, OTC, CME)• Carbon-adjusted spark spreads• Air Daily, US Electricity• Argus California Carbon Summit Oct. 28-

30 in San Francisco

illuminating the markets Copyright © 2013 Argus Media Ltd. All rights reserved.

• Ideally results in the cheapest reductions of CO2

Why price carbon?

y p◦ Provides a long-term price signal for investment◦ Rewards efficiency

• Has worked in the past with the Acid Rain Program, lead and Tier I, II gasoline programs


• Government sets a cap on CO2 and other greenhouse

What is cap and trade?

p ggases

• Then creates allowances (rights to emit a tonne of CO2)◦ Can be given away for free or auctioned offCan be given away for free or auctioned off

• Trade in allowances creates the carbon price and profit motive for reducing emissions


• California’s cap-and-trade program is meant to be

In Context

p p gresponsible for ~20% of its CO2 reductions

• The RPS, Low-Carbon Fuel Standard and over a dozen other programs doing the rest

• But the carbon price is the backstop and last line of defense for the 1990 levels of GHG emissions by 2020 target


The Cap

• Caps power sector and 394.5

382.4 370.4 358.3 346.3 334.2

300

400 industrials in 2013-2014

• Then caps transport fuels d t l i 2015

162.8 159.7200

mn

t CO

2

and natural gas in 2015

• Allowances are both given away and auctioned by the

100

away and auctioned by the state

• California now working on 02013 2014 2015 2016 2017 2018 2019 2020

• California now working on post-2020 caps for its program, finding other states to join up


• Point of regulation: first electricity deliverers

Electric Sector

• Electric imports are included◦ Plant-specific, Asset-Controlling Supplier or WECC default◦ System-tagged power may be added as a default

• Allowances90 f ll ll d f f b d hi i l i i◦ ~90pc of allowances allocated for free, based on historical emissions- 2013s allocated October 2012 for distribution utilities- 2014-2020s allocated on Nov 1 of each calendar year 2013-2019

◦ IOUs must sell allowances at state-run auctionsIOUs must sell allowances at state run auctions- Spending rules developed by CPUC- Auction are held every quarter, fifth one is in November


How carbon changes power running costs

$100 00

$120.00

$60.00

$80.00

$100.00

$/M

Wh

$-

$20.00

$40.00

Source: Argus pricing, 2010-2012


g p g,Acid Rain Data for Heat rates

Fossil units in OR, WA, ID, MT

$60 00

$70.00

$40.00

$50.00

$60.00

MW

h

$10.00

$20.00

$30.00 $/M

$-

Fuel cost



g p g,Acid Rain Data for Heat, CO2 rates

And adding in a $15/t carbon price

$60 00

$70.00

$40.00

$50.00

$60.00

MW

h

$10.00

$20.00

$30.00 $/M

$-

Carbon Cost at $15Fuel cost




And with a $25/t carbon price

$60 00

$70.00

$40.00

$50.00

$60.00

MW

h

$10.00

$20.00

$30.00 $/M

$-

Carbon Cost at $25Fuel cost




Over to LennyOver to Lenny

Copyright © 2013 Argus Media Ltd. All rights reserved.

California power mix140,000

100,000

120,000

40 000

60,000

80,000

GW

h

0

20,000

40,000

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Hydroelectric Nuclear In-state Coal OilGas Geothermal Biomass WindSolar Other Direct Coal Imports Unspecified Power

S C lif i C i i


Source: California Energy Commission

Electricity imports

• Powerex (BC Hydro): ( y )0.0293mt/MWh

• BPA: 0.0249mt/MWh

WECC wide default: • WECC-wide default: 0.428mt/MWh

Source: California Energy Commission, 2007-2010 average generation/imports


generation/imports

Imports into California120,000

80 000

100,000

60,000

80,000

GW

h

20,000

40,000Southwest

Northwest

0

20,000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012




Carbon price integrated well

27

22

te

12

17

Mar

gina

l Hea

t Ra

t

7

Dat

ean

-201

2an

-201

2eb

-201

2eb

-201

2ar

-201

2ar

-201

2pr

-201

2pr

-201

2pr

-201

2ay

-201

2ay

-201

2un

-201

2un

-201

2ul

-201

2ul

-201

2ul

-201

2ug

-201

2ug

-201

2ep

-201

2ep

-201

2ct

-201

2ct

-201

2ct

-201

2ov

-201

2ov

-201

2ec

-201

2ec

-201

2an

-201

3an

-201

3an

-201

3eb

-201

3eb

-201

3ar

-201

3ar

-201

3pr

-201

3pr

-201

3ay

-201

3ay

-201

3ay

-201

3un

-201

3un

-201

3ul

-201

3ul

-201

3ug

-201

3ug

-201

3ug

-201

3

M

13-J

a27

-Ja

09-F

e23

-Fe

07-M

a20

-Ma

02-A

p16

-Ap

27-A

p10

-Ma

23-M

a06

-Ju

19-J

u02

-Ju

16-J

u27

-Ju

09-A

u22

-Au

05-S

e18

-Se

01-O

c12

-Oc

25-O

c07

-No

21-N

o06

-De

19-D

e04

-Ja

17-J

a31

-Ja

13-F

e27

-Fe

12-M

a25

-Ma

08-A

p19

-Ap

02-M

a15

-Ma

29-M

a11

-Ju

24-J

u08

-Ju

19-J

u01

-Au

14-A

u27

-Au

Carbon Adjusted SP-15 marginal heat rate Carbon Adjusted NP-15 marginal heat rate

Gas-implied SP-15 marginal heat rate Gas-implied NP-15 marginal heat rate


December 2013, Vintage 2013 CCAs200,000

$25.00

160,000$22.00

80,000

120,000

$16.00

$19.00

40,000$13.00

0$10.00Aug-11 Trade

#0

Jan-12 Trade #175

May-12 Trade #350

Jul-12 Trade #525

Sep-12 Trade #700

Nov-12 Trade #875

Dec-12 Trade #1050

Jan-13 Trade #1225

Feb-13 Trade #1400

Mar-13 Trade #1575

Mar-13 Trade #1750

Apr-13 Trade #1925

May-13 Trade #2100

May-13 Trade #2275

Jul-13 Trade #2450

Volume Price


California CO2 costs for power$18

$12

$15

$6

$9

$/M

Wh

$0

$3

02-Jan-2013 02-Feb-2013 02-Mar-2013 02-Apr-2013 02-May-2013 02-Jun-2013 02-Jul-2013 02-Aug-2013

CO2 cost US western grid electric exports to CaliforniaCO2 cost spark adjusted SP15 CO2 cost Powerex electric exports to California CO2 cost Bonneville Power Administration electric exports to California


• Carbon price adds $4.50-6/MWh on unspecified WECC

Electricity Imports

p $ pimports to CA

• Or $0.35-45/MWh for specified BPA or BC Hydro power

Premium for BPA specified should be around $5 • Premium for BPA-specified should be around $5 ideally, but congestion costs and policy/verification risk pull premium down

• Was around $2-3/MWh, but no recent data


Imports into CAISO are about the same12,000,000

8,000,000

10,000,000

4,000,000

6,000,000

MW

h

2,000,000

4,000,000

-

Jan-

11

Feb-

11

Mar

-11

Apr-

11

May

-11

Jun-

11

Jul-

11

Aug-

11

Sep-

11

Oct

-11

Nov

-11

Dec

-11

Jan-

12

Feb-

12

Mar

-12

Apr-

12

May

-12

Jun-

12

Jul-

12

Aug-

12

Sep-

12

Oct

-12

Nov

-12

Dec

-12

Jan-

13

Feb-

13

Mar

-13

Apr-

13

May

-13

Jun-

13

Jul-

13

Aug-

13

RENEWABLES NUCLEAR THERMAL IMPORTS HYDROSource: CAISO


Source: CAISO

North to South seem about same

PDCI COI

2,500

3,000

3,500

3 500

4,000

4,500

5,000

1,500

2,000

,

2,000

2,500

3,000

3,500

500

1,000

500

1,000

1,500

0

30-J

un-1

2

31-J

ul-1

2

31-A

ug-1

2

30-S

ep-1

2

31-O

ct-1

2

30-N

ov-1

2

31-D

ec-1

2

31-J

an-1

3

28-F

eb-1

3

31-M

ar-1

3

30-A

pr-1

3

31-M

ay-1

3

30-J

un-1

3

31-J

ul-1

3

N_to_S_capacity Actual

0

30-J

un-1

2

31-J

ul-1

2

31-A

ug-1

2

30-S

ep-1

2

31-O

ct-1

2

30-N

ov-1

2

31-D

ec-1

2

31-J

an-1

3

28-F

eb-1

3

31-M

ar-1

3

30-A

pr-1

3

31-M

ay-1

3

30-J

un-1

3

31-J

ul-1

3

N_to_S_capacity ActualSource: BPA


Source: BPA

Bill PetersReporterEmail: Bill Peters@argusmedia comEmail: [email protected]: 202.349.2889

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